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1) Maintaining local purchasing power, especially that of low-income earners;

2) Supporting the prices of agricultural products, such as rice;

3) Maintaining and expanding export markets;

4) Assuring adequate liquidity;

5) Speeding up credit extensions to problematic sectors such as real estate, tourism, and small and medium-sized enterprises (SMEs);

6) Exchange-rate management to maintain export competitiveness;

7) Additional measures to promote the capital market.

The committee's chairman also proposed speeding up government investment and government expenditure by setting up a committee to speed up the disbursement of the budget, which the finance minister would chair.

The above proposal is quite comprehensive from a macro point of view. The one proposal that hit the bull's-eye was that to speed up government investment and expenditure. From the economic figures for the second quarter as announced by the National Economic and Social Development Board (NESDB), it is quite clear that the economic slowdown was due mainly to the negative growth of government investment and government expenditure, which pulled down GDP by 5 per cent.

The NESDB figures, as shown in the accompanying table, do surprise me a great deal, because the government has always stated that its intention is to speed up the economy, and it has frequently mentioned investments in various government projects. Budget disbursement, however, was lower than it has been in recent years both for government investment and expenditure.

The former government was thought to be slow in disbursing the budget, but this government has been even worse. It is not known whether this is due to a lack of experience in monitoring the disbursement of the budget or because of the slow progress of investment projects. Whatever the cause, it shows that concerned ministers have been inefficient in following up and pushing forward planned investments. Therefore the proposal to speed up government investment and expenditure is really the one that hits the bull's-eye.

Another outstanding proposal is the one to support the price of crops, such as rice. I believe that the chair adviser intends to support the price of other major crops as well. I am glad that the chair adviser highlighted this issue, and I hope that this will be followed by more measures from government agencies beyond the Commerce Ministry alone. I will follow up on this issue and wish those involved success.

However, of the seven proposals, two are questionable: one runs contrary to the facts, while the other may lead to financial loss.

The proposal to provide adequate liquidity may be based on wrong information. Data reported by financial institutions show that at the end of June total deposits amounted to Bt8.3 trillion, while the total amount of credit outstanding was Bt7.5 trillion. Excess deposit over credit extended was as high as Bt724 billion, which means there is much liquidity left in the financial system.

In banking language, the loan-to-deposit ratio at the end of June was 91.29 per cent, which shows that there is still more room for liquidity to lend. I once worked in a commercial bank. As long as this ratio does not go beyond 95 per cent, we do not have to worry about liquidity. And even if the ratio goes up to 100 per cent, as happened during the boom period, financial institutions still will not run out of funds to lend, as they can borrow from overseas using their usual credit lines for lending on to clients in Thailand. Therefore in the current situation financial institutions are not short of funds to lend.

Credit extensions by financial institutions do not depend on the availability of funds alone; they rely more on the risk profile of the project as well as that of the borrowers.

In a free-enterprise economy, every part of the economy should be allowed to make its own decision in performing its duties. Financial institutions have the duty to receive deposits and channel the funds to finance economic activities to support economic growth, but financial institutions must also ensure that the credit extended is repaid in full and that they do not incur any loss, which may finally become a burden on the economy as a whole.

Normally, businesses that are in demand will find it easy to get financial support, but it would be strange to push financial institutions to extend credit to businesses offering products and services for which there are no buyers. It would be against the principle of proper allocation of resources to channel funds to support businesses that are not in demand. The proposal to speed up credit extensions to sectors affected by the economic situation, therefore, sounds unpleasant because the affected sectors are facing a state of oversupply or do not have an adequate demand for their products and services. I would rather leave it to market mechanisms to allocate financial resources to avoid generating bad debt, which would have to be cleaned up later.

What the government should do instead is work towards increasing demand for various goods and services. When there is a demand for a given product, financial support for businesses offering it comes naturally.

The proposal to have the Finance Ministry speed up government investment and expenditure is the right way to proceed to increase demand for goods and services offered by enterprises that do business with government agencies, and it would in turn generate further demand for related businesses.

Measures to promote tourism, speed up government mega-projects and promote certain exports are needed to boost demand for tourism and construction businesses, as well as exports. Assistance for the real-estate sector should take the form of measures to boost demand for property by reducing transfer fees or allowing interest on mortgages to be deducted from income tax. Increased demand would ensure loan repayment, and financing would not be difficult to find.

I would raise only this minor issue because I am worried that this proposed policy might end up resulting in a financial loss to the country later on. Other proposed policies in the package are good enough, especially the one to speed up government investment and expenditure, both of which are under the full control of the Finance Ministry.

Until Next Monday.